a. Using the information on the Excel sheet provided, Please thoroughly explain the steps on how to determine the expected levered-before-tax-annual rate of return on your capital.b. please determine the portion of the return that is expected from the annual cashflows and the portion that is expected as a result of property price appreciation. Inputs:Acquisition PriceExpected 1st Year NOI"Going in" CAP$2,890,000 Down Payment$149,991 Mortgage Rate5.19% MaturityCAP over (below) market0.50% Levered Required ReturnRequired Rate of Return8.50% Minimum Required DCRExpected NOI Growth3.50% Expected Treasury YieldTerminal NOI Growth2.90% Expected LT Inflation.Acquisition Price + Closing Costs $2,962,250 Expected Risk Premium (bp)End of year012345678Amortization schedule:TotalINOI01$100,7172 $98,2063$95,5244$92,6605 $89,6016781920$149,991$155,241$160,674$166,298$172,118$178,142$184,377$190,8309 $75,14010$70,89011 $66,350I$86,334$82,845$79,11912 $61,503$56,3251314 $50,79615$44,89016$38,58317 $31,84718 $24,653$16,969$8,764$1,271,714PPAcquisition/Disposition($2,962,250)$3,195,084Outputs:$1,481,125 Terminal CAP6.80% Loan Amount20 Mortgage Payment (Annual)11.00% DCR1.2 Mimimum DCR Satisfied?4.30% Mortgage Balance at Sale2.90%400CF($2,962,250)$149,991$155,241$160,674$166,298$172,118$178,142$184,377$3,385,915Total PV: $2,606,659NPV: -$355,591IRR: 6.45%Ending balance$1,481,125$36,925 $1,444,200$39,436 $1,404,763$42,118 $1,362,645$44,982 $1,317,663$48,041 $1,269,622$51,308 $1,218,315$54,797 $1,163,518$58,523 $1,104,995$62,502 $1,042,493$66,752 $975,741$71,292 $904,449$76,139$828,310$81,317$746,993$86,846 $660,146$567,394$92,752$99,059 $468,335$105,795 $362,540$112,989 $249,551$120,672 $128,878$128,878$0I + P$1,481,125 $2,752,839PV of CF($2,962,250)$138,241$131,870$125,793$119,996$114,466$109,191$104,160$1,762,9425.900% Closing Fees$1,481,125 Comission$137,642 Closing Costs $1.09 Selling Expense $No$1,104,995DS($137,642)($137,642)Levered CF$ (1,481,125)$12,349$17,599$23,032$28,656$34,476$40,500$46,735($137,642)($137,642)($137,642)($137,642)($137,642)($1,242,637) $2,143,277Total PV: $1,055,775($425,350)6.17%NPV:IRR:2.50%4.00%72,250133,128PV of Levered CF($1,481,125)$11,125$14,284$16,841$18,876$20,460$21,653$22,510$930,025down paymentmax down paymentmax levered pricemax unlevered pricePv of NOI (year 8)Pv of NOIpv of saleR51%$1,055,775$2,070,146$2,606,659$99,360$943,077$1,663,583943.077/26066591663583/260665936%64%

The levered NOI is the property's net operating income (NOI) after accounting for the interest…

a. Using the information on the Excel sheet provided, Please thoroughly explain the steps on how to determine the expected levered-before-tax-annual rate of return on your capital. b. please determine the portion of the return that is expected from the annual cashflows and the portion that is expected as a result of property price appreciation.

a. Using the information on the Excel sheet provided, Please thoroughly explain the steps on how to determine the expected levered-before-tax-annual rate of return on your capital. b. please determine the portion of the return that is expected from the annual cashflows and the portion that is expected as a result of property price appreciation.

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter15: Harvesting The Business Venture Investment

Section: Chapter Questions

Problem 5EP

See similar textbooks

Similar questions

Firm A Face value- RM 1000000 Maturity- 10 years Coupon rate- 8% Market rate- 7% Redeem at 101% Firm B Face value- RM 1000000 Maturity- 10 years Coupon rate- 8% Market rate- 9% Redeem at Fair value Do amortisation table- effective rate for Firm A and Firm B with these elements: (Year, beginning amount, effective rate, coupon interest paid, discount amortisation and ending amount) Transaction cost = RM 45000
On the 18 th July 2020,1 purchased a 2.45%,21 st August 2030 CGB at a yield of 1.346%. then on the 16 th of September 2021 on sold it when the yield was 1.228%. Assuming the reinvestment rate was 1.25% pa simple interest, what was the holding period yield for this investment? Express your answer as a percentage to 3 decimal places. eg not 0.0625 but 6.253
balance sheet 20201231 (mkr): fixed assets 9540 current assets 2630 s: a assets. 1280 equity 2070 long loans 5650 short-term. liabilities. 4360 s: a EQ and liabilities 12080 Let us assume that a new share issue is carried out where the owners invest SEK 1,400 million. The money is then used to repay long-term loans of SEK 900 million and short-term liabilities of SEK 400 million. Your task is to fill in the amounts for the following items in the balance sheet after the new share issue and associated transactions described above have been completed: S assets:mkr Equity:mkr Short loans:mkr
A firm after -tax operating income ( after-tax EBIT)$90,000 in 2018. The value of depreciation is $8000 in 2018. Operating working capital increased by $20,000, and the firm purchased $30,000 of assets. The firm's free cash flow is Given the rate information in the table belowCan you calculate the maturity risk premium? 3 month T-bill = 2.5% (risk-free rate), 30 years Bonds-5.0%, 30year corporate bonds 7.0% Inflation Rate- 3.6% and the liquidity risk premium is 0.03%
Q6. Consider an asset with a current market value of $400,000 and a duration of 5 years. Assume the asset is partially funded through a zero-coupon bond with a maturity (principal) value of $360,000 and has a maturity of 5 years. The current market rate is 6% and interest rates are expected to increase by 1%. Which of the following statements is true? The current equity value of the position is $661,976 and if interest rates increase the equity value will decrease. The current equity value of the position is $861,876 and if interest rates increase the equity value will increase. The current equity value of the position is $450,000 and if interest rates increase the equity value will remain unchanged. The current equity value of the position is $130,987 and if interest rates increase the equity value will decrease. The current equity value of the position is $40,000 and if interest rates increase the equity value will decrease.
Firm A Face value- RM 1000000 Maturity-10 years Coupon rate-8% Effective rate-7% Bond value= RM1070188 Firm B Face value- RM1000000 Maturity-10 years Coupon rate-8% Effective rate-9% Bond value= RM 935816 Do amortisation table for firm A and firm B with these elements: (Year, Beginning amount, effective interest, coupon interest paid, premium amortisation, ending amount)
JUST Corporation provided the following information: 1) 9% 30million bonds outstanding with 100 par value and 10 years remaining to maturity callable at 104 2) 3 million Unamortized floatation costs and discount on old bonds 3) Corporate tax rate is 30% . The company is considering replacing the old issue with a new 30 million 8%, 10 year issue and floatation cost of 2 million. The overlap period during which both issues will be outstanding is expected to be one month. Compute for Initial cash outlay.
Question 3Firm A plans to acquire Firm B. The acquisition would result in incremental cash flowsfor Firm A of £10 million in each of the first five years. Firm A expects to divest Firm Bat the end of the fifth year for £100 million. The β for Firm A is 1.1, which is expectedto remain unchanged after the acquisition. The risk-free rate, Rf, is 7 per cent, andthe expected market rate of return, Rm, is 15 per cent. Firm A is financed by 80 percent equity and 20 per cent debt, and this leverage will also remain unchanged afterthe acquisition. Firm A pays interest of 10 per cent on its debt, which will alsoremain unchanged after the acquisition.Required:a) Disregarding taxes, what is the maximum price that Firm A should pay for Firm B?b) Firm A has a share price of £30 per share and 10 million shares outstanding. IfFirm B’s shareholders are to be paid the maximum price determined in part (a) viaa new share issue:i. how many new shares will be issued ii. what will be the post-merger share…
A bank is considering a debt-for-equity swap to slavage a $5 million loan that is in default. They expect to recover $2.7 million after liquidation ane legal fees. A turnaround expert has recommended the following cassh flow analysis if the bank chooses the debt-for-equirt swap. Initial Investment $5,000,000 in year 0 Expected cash flows after turnaround $1,750,000 in years 2-6 Sale of Equity (Exit) $3,500,000 in year 6 Equity ownership 70% Cost of capital 12% Should they engage in the debt-for-equity swap? A Yes, they should engage in the debt-for-equity swap B No, they should not because the NPV after the turnaround is greater than the liquidation value C Yes, they should engage in the debt-for-equity swap only if the cost of capital is 10% D No, they should not engage in the…
An investor invested in a 4-years, 4 percent EuroLBP bond sells at par. A comparable risk 4 years, 5.5 percent LBP/dollar dual currency bond pays $666.66 at maturity per LBP1,000,000 of face value. It sells for 1,200,000. Required: Calculate the implied LBP/$ exchange rate at maturity.
(Bond valuation relationships) A bond of Telink Corporation pays $120 in annual interest, with a $1,000 par value. The bonds mature in 15 years. The market's required yield to maturity on a comparable-risk bond is 10 percent. a. Calculate the value of the bond. b. How does the value change if the market's required yield to maturity on a comparable-risk bond (i) increases to 13 percent or (ii) decreases to 5 percent? c. Interpret your findings in parts a and b. Question content area bottom Part 1 a. What is the value of the bond if the market's required yield to maturity on a comparable-risk bond is 10 percent? $enter your response here (Round to the nearest cent.)
Q4 An analyst holds a set of forward contracts on euro, against usd (=hc). Compute the fair value of the contracts.(a) Purchased: eur 1m 60 days (remaining). Historic rate: 1.350; current rate for same date: 1.500; risk-free rates (simple per annum): 3% in usd, 4% in euro. (b) Purchased: eur 2.5m 75 days (remaining). Historic rate: 1.300; current spot rate: 1.5025; risk-free rates (simple per annum): 3% in usd, 4% in euro. (c) Sold: eur 0.75m 180 days (remaining). Historic rate: 1.400; current rate for same date: 1.495; risk-free rates (simple per annum): 3% in usd, 4% in euro.